HMRC Powers Relating to VAT - Value Added Tax
Introduction All the statutory powers previously exercised by Customs and Excise have been transferred to HMRC. HMRC are granted extensive powers by the Customs and Excise…
Value Added Tax (VAT)
What Is VAT (Value Added Tax)?
Introduced on 1st April 1973, VAT is primarily a tax on the consumption of goods and services. It is the VAT-registered supplier of these goods and services who charges the tax on his supplies. He collects it on behalf of the government.
When introduced, VAT was infamously described as ‘a simple tax’, but this is no longer the case. It has, therefore, become more of a burden on the VAT-registered person. He may find that a raft of penalties are now levied on him if he makes an honest mistake. Let alone attempts (unwisely) to defraud the revenue!
HM Revenue and Customs (HMRC) is responsible for administrating the tax to ensure they collect the correct amount. The government collects the correct amount of tax at the correct time by the Value Added Tax Act 1994, Sch. 11, para. 1(1).
VAT Civil Penalties
When VAT was first introduced, contraventions of the legislation were treated as criminal matters (as they were under the preceding tax, purchase tax). However, as a result of the Keith Committee’s recommendations, many of the minor offences have become decriminalised and civil penalties introduced. A civil evasion penalty now exists to tackle less serious instances of fraud.
After the merger of the Inland Revenue and Customs and Excise in 2005, new Civil Investigation of Fraud (CIF) procedures were introduced to deal with cases of suspected serious fraud. The new procedures replace the former Inland Revenue Hansard procedures and the former Customs and Excise Civil evasion procedures for cases involving serious evasion of tax. Although the use of these procedures was initially restricted to Special Civil Investigations (SCI), HMRC have extended their use to Local Compliance and National Compliance. HMRC is satisfied that the new procedures are compliant with the Human Rights Act 1998. In particular Article 6, which additionally gives the right to a fair trial. They consider that the case of Khan v C & E Commrs endorsed the principles inherent in the new procedures. If you are under any kind of VAT Investigation then give us a call today.